This little study got started several years ago because Florida Power & Light and its parent (Next Era Energy) were vigorously lobbying for rate increases and subsidies to support their craving for “Green Energy”. Was FP&L about to go “Green” with energy policies modeled on Spain, Germany, Denmark or the UK? If so Floridians, who already pay more for electricity than the US average might end up challenging Connecticut’s $0.17 /kWh. Two years ago I published a review of solar power in Florida based on the opinions of people who operate major power plants.

My goal was to find out how the electricity generating technologies applicable to Florida compare in terms of economic performance at the plant level, where the real wealth is created. The higher the operating margins, the more wealth is available to pay taxes, reward investors and pay employees. In a better world, high operating margins might even lead to lower consumer prices! In contrast, weak operating margins encourage companies to seek subsidies which inevitably fosters corruption while wasting tax dollars.

The solar power plant shown below covers over 500 acres. The collectors can be seen at the top of this aerial photograph of Florida Power & Light plant located at Indiantown in Martin county, Florida. In the foreground there are two steam turbine plants and on the right side there are four “Combined Cycle” plants. In the center are the connections to the 250 kV and 500 kV transmission lines that deliver 7% of Florida’s electricity:

While I had little difficulty gaining access to the Martin plant, I wanted to visit a nuclear plant given that last year 15% of the electricity in Florida was generated by nukes (cf. 5% by coal fired plants). FP&L operates nuclear power plants at Turkey Point and Port St. Lucie. I wasted an entire year trying to gain access to the St. Lucie plant. Eventually I gave up and switched my attention to Duke Power.

Given that I had served on the Duke university Radiation Safety Committee for many years and was a strong supporter of Duke Power during the Shearon Harris controversy I was not expecting any difficulty, so I wrote to Bill Johnson, the CEO knowing that he is a Duke alumnus. He turned me down flat and refused to see me when I showed up at his office. Roughly a year later he was ousted but he must have laughed all the way to the bank with that $45 million severance! In spite of this setback I was able to spend a week at the the Oconee station, a three unit nuclear plant operated by Duke Power near Seneca, South Carolina.

The most striking similarity between the Indiantown and Oconee plants is the use of lakes as heat sinks. Both plants have lakes with an area of roughly 18,000 acres

Staffing

Here the contrast is stark as nuclear power is more labor intensive than natural gas power. On arrival at the Indiantown plant I could not enter as the main gate was closed and no staff were present. I had to use my cell phone to get someone to let me in! At the Oconee plant I could not enter for quite a different reason. There were too many employees! While the Indiantown plant has a capacity of 3.6 GW the total staff is ~250. The smaller Oconee plant with its 2.5 GW capacity employs 1,400 people including 350 staff for security, many of them armed and dangerous!

Steam turbine

Combined cycle

Solar

Nuclear

Fuel

Natural gas

Natural gas

None

U235

Plant area (Acres)

180

260

500

340

Operations staff

40

120

20

120

Support staff

8

24

4

1,280

Capacity (MW)

1,652

2,079

75

2,538

Capacity factor (%)

0.85

0.85

0.24

0.85

Thermal efficiency (%)

38

60

38

38

Output (TWH/year)

12

15

0.16

19

The initial problem at Oconee was that they had lost my paperwork. Once that was resolved my car was searched very thoroughly inside and out. The engine compartment was inspected as well as the underside of the car. It reminded me of Belfast during a security crackdown. The 1,280 support staff may strike you as a little excessive. Given that 350 of them are involved in security you may wonder what the remaining 930 do. The answer is that these people are needed to comply with US government regulations. I used to think that UK government’s rules and regulations were Byzantine. Alas, “Uncle Sam” makes us “Brits” look like amateurs when it comes to bureaucracy and red tape. The amazing thing is that “Feather Bedding” hundreds of useless employees does not matter. Nuclear power is so cost effective at the operations level that you could triple the staffing and still make an obscene margin. Staffing levels are not a significant factor except in the case of solar.

Operating margins

In order to appreciate the economic differences between the various technologies reviewed I have scaled the numbers to what they would be for a source generating 1 GW of electricity for an entire year with no down time. It is assumed that the electricity sells for $100 per MWh after deducting 7% for transmission losses.

ONE GIGA-WATT YEAR ($ = Million US dollars)

Steam turbine

Combined cycle

Solar

Nuclear

Area (acres)

128

147

27,778

158

Annual sales

$815

$815

$815

$815

Fuel cost

$382

$242

$0

$66

Labor cost

$5

$12

$200

$97

Operating margin

$428

$561

$615

$652

The first thing to notice is how compact natural gas and nuclear power plants are. Solar on the other hand requires ~200 times more space even without making allowance for energy storage. All these technologies produce good margins from operations. Nuclear power generates the largest margins but one needs to remember what it costs to construct nukes. A modern version of the Oconee station would have two Westinghouse AP1000 units (2,234 MW), costing roughly $8 billion. So how much did the Oconee station actually cost when it entered service in 1973? The answer is $500 million. Its operating licence was recently extended to 2033. Our hypothetical Oconee II would need to set aside more than half ($800 million) of its annual operating margin to amortize the cost of construction. This translates into a huge competitive edge for “Old Nukes”.

Do nukes have to cost that much? Currently there are AP1000s under construction in the People’s Republic of China for $2 billion each or half of what a similar installation costs in the USA. It is thus inevitable that the PRC will soon have a fleet of shiny new nukes while the USA clings to its shabby “Old Nukes”. I see this as a metaphor for excessive regulation destroying innovation and with it the prosperity of our children.

The Martin solar plant cost $476 million even without any provision for storing energy. Scaling this to an average output of 1 GW(e) gives a cost of $26 billion, more than five times what a comparable nuclear plant would cost in the USA. Thus such installations make no economic sense. Only where governments offer huge subsidies can one expect to see solar power on a large scale.

At the retail level where I live, electricity costs $0.10 per kWh or $100 per MWh:

PER MW-HOUR

Steam turbine

Combined cycle

Solar

Nuclear

Annual sales

$100.00

$100.00

$100.00

$100.00

Fuel cost

$46.88

$29.69

$0.00

$8.06

Labor cost

$0.63

$1.50

$24.55

$11.95

Operating margin

$52.49

$68.81

$75.45

$79.99

So where do all these numbers come from? Like the IPCC, I use models. My model is a single page spread sheet based on information given me by people who run those power plants. Because the top management of FP&L and Duke Power refused to cooperate I never got to look at their records and so some assumptions had to be made made:

Loaded staff cost

$150,000

per year

Transmission loss

7.0

%

Retail price

$0.10

$/kWH

Nuclear fuel cost

$7.50

/MWH

Natural gas price

$5.00

$/1000 cu. ft.

Discussion

The lowest cost electricity comes from “Old Nukes”, so the easiest way for a utility company to keep prices down is to apply for extensions for their existing reactor licenses and upgrade these reactors wherever possible. Even though the economics of “New Nukes” are attractive in spite of excessive regulation there is no hope of a rapid build up of nuclear capacity on the lines of the Messmer plan in France 40 years ago. The political clout of Greenies is still sufficient to block the licensing of new sites for nuclear power plants in most of the USA. Until that changes the best one can hope for is adding units on existing nuclear sites.

As an FP&L customer I was agreeably surprised by the company’s latest ten year plan which makes significant investments in two of their four “Old Nukes” all of which have received 20 year license extensions promising cheap electricity for many years to come. Two “New Nukes”, Westinghouse AP1000s, known as “Turkey Point 6 &7” are planned for around 2022. Solar only contributes 0.16% of the total power generated as no new investments are included:

More than half of FP&L’s output will continue to come from natural gas while the nuclear power share will rise from 15% to 25% of the total. Coal will remain at ~5%. “Other” includes biomass and imports from other suppliers.

Given that Next Era Energy, operates huge solar installations in California it is significant that even though Florida has plenty of sunshine there will be no massive FP&L roll out of solar power.

So why all that lobbying for “Green Energy” and rate hikes? My guess is that Next Era Energy was doing what all large companies do by going after all the corporate welfare available. While solar is not quite dead in Florida, the government in Tallahassee is displaying admirable reluctance to repeat the Spanish fiasco.

Interesting article. Renewables are really a waste of both money and space.

Living in Connecticut I figured I give you an example of a rough breakdown of how they charge for electricity in my state. I am about 12 miles from the Millstone nuclear plant. Connecticut is also part of the RGGI carbon scam which is not broken out in my billing.

Last billing period I used 320 KWH at a total cost of $60.54. This works out to be $0.189 KWH. As can be seen by the rate structure below, the frugal user pays the most per KWH. Due to the flat rate connection fee I’d have to increase my usage to about 520 KWH in order to be paying only $0.17 KWH.

That $0.10 per kWh is what I actually pay as an FP&L customer in Brevard County. If I lived in the next county to the west (Orange county) that includes Orlando I would be paying much more.

While FP&L and Progress Energy account for more than half of the electricity consumed in Florida there are at least another 40 smaller “Utilities”. The average retail price over the entire state in April 2013 was $0.1213 per kWh:http://publicpower.com/electric-rate-comparisons/

While industrial scale solar makes no sense I am a big fan of rooftop solar as long as I get the absurdly generous subsidies currently available to favored citizens in this state. This is a wonderful example of the “Reverse Robin Hood Principle” where the poor are robbed to feed the rich. Here is something I posted on Forbes a couple of weeks ago:

QUUOTE
renewableguy,
Rooftop solar in Florida is a “No Brainer”. The main reason that my home does not have a 5 kW PV solar installation costing $20,000 is my wife’s insistence that her kitchen upgrade project has a higher priority.

The second factor delaying my solar project is the availability of subsidies from the power companies. These are absurdly generous ($2 per peak Watt) so I would get a $10,000 subsidy from them plus $4,000 from the federal government. Unfortunately, only a few hundreds are granted each year and my name has not come up yet.

The third delay factor is that I am a FP&L customer paying ~$0.10 per kWAh. If I lived in Orlando I would be a “Progress Energy” customer paying $0.16 per kWAh so the “Pay Back” would be much quicker. I have a spreadsheet you might like that factors in things that most people leave out (e.g. maintenance and depreciation).

While I am a fan of rooftop solar (as long as I qualify for the subsidies that pay 70% of the capital outlay), industrial scale solar makes no sense at all as I pointed out in that “Guest Post” on Brave New Climate.

With regard to Germany’s “Strong Economy”, don’t expect it to stay that way if they continue making dumb decisions in the energy sector. Killing nuclear while investing heavily in wind and solar is beyond dumb. On the other hand they are building coal fired plants at an impressive rate so they may yet avoid an energy disaster.

Have you ever considered nuclear power as a “renewable” energy source? Check out LFTR (Liquid Fluoride Thorium Reactor” that breeds fissile Uranium from Thorium and burns what we presently call “Nuclear Waste”. No need for Yucca mountain!

Great post!
I live in Florida as well, near Tampa. There was an interesting set of articles recently in the Tampa Bay Times, where they argued that natural gas would be cheaper than the 2 new Levy county nuclear reactors. Duke claims a total cost of $24B, which includes everything but the kitchen sink (new transmission, substations, probably smart grid upgrades, etc etc). I commented that the TBT was making the case that even a $5/tonne equivalent carbon tax was unacceptably expensive (that is what the price difference worked out to be over their 60 year period).

I also read a June 2012 article from power engineering magazine on the FPL Martin Solar Plant. In it FPL claims that the plant will save about $178M in natural gas costs over the 20 year life of the $400M solar thermal facility. That was assuming much higher natural gas prices than today exist. It will never break even.

FPL also claim it avoids 2.75 million tons of CO2. That comes to ($400M-$178M)/2.75M = $80.7 per tonne CO2 as the cost of avoided CO2. Although that is more than 15 times more costly than the Levy nuclear plant’s equivalent CO2 cost, the TBT was glowing with praise for the Martin Solar Plant.
Go figure.

It will be interesting to see what’s left of the solar array after a hurricane rolls through.

Those solar collectors in Martin county look pretty flimsy so I asked how they would survive a hurricane.

The answer was quite surprising. Wind tunnel tests were done on scale models with the aim of withstanding at least a category 3 storm. The collectors need to be approximately inverted to minimize the stresses while a storm passes through; the mountings have been designed to allow that.

Given that there has not been a category 3 storm making landfall in the USA since Wilma (2005) we may have to wait a while to find out whether the engineers got it right.

All that stuff about eliminating CO2 emissions is great PR but Mother Nature won’t notice 0.00275 Gt of CO2. That translates into 0.00075 Gt of carbon. Natural sources of carbon emit and absorb ~150Gt of carbon per year.

“Old Nukes” produce electricity at an unbeatable cost. Two point five cents per kWh plus a mark up to pay for “Overheads” such as Bill Johnson’s $45 million severance payment.

When it comes to cost comparisons between “New Nukes”, natural gas and coal in the USA there are wonderfully complex studies of LCOE (Levelized Cost Of Electricity) that show coal as the most cost effective until you factor in assumptions about “Disincentives” (e.g. carbon taxes) or “Subsidies”. The problem with such sophisticated studies is that they are strongly influenced by government policies. That is why I avoided such issues by concentrating on operations.

Nuclear power is not sensitive to fuel cost whereas natural gas is. Currently natural gas costs $4 per 1,000 cu. ft compared to the $5 used in my calculations. As long as US government does not find a way to stop the booming frakking industry, my guess is that natural gas prices will remain low and FP&L’s investments in a second gas pipeline will prove to be a really smart move.

When Hurricane Andrew hit south Florida, it absolutely wiped out the town of Homestead. There wasn’t much left standing. The only damage to power generation was damage to one stack of one unit of a coal plant. Such a storm today would eliminate 100% of the wind and solar generation capacity of the area. The cost of installing it in the first place would need to be completely repeated to replace them. A place like Florida would be subject to replacing any wind/solar infrastructure at fairly frequent intervals. In addition, the flying turbine blades would be a hazard to life and property. Here is a picture of a turbine blade that hit a daycare center near El Reno, OK last week:

I would feel safe saying that turbine is currently generating 0 kwh of power and will need to be completely replaced. Insurance companies are going to tire of this.

The Production Tax Credit (PTC) works the following way as explained by Senator Lamar Alexander: “… this 2.2 cents credit is worth 3.4 cents in cash savings on the tax return of a wealthy investor” and “continues for the first ten years that the turbine is in service.” “Wind developers often sell their tax credits to Wall Street banks or big corporations or other investors who have large incomes. They create what is called a ‘tax equity’ deal in order to lower or eliminate taxes.” http://tinyurl.com/d663lvd

See page 18 & 19 of this NextEra presentation: http://www.energyintegrityproject.org/uploads/5_-_Daniel_Lotano_Project_Finance_and_Tax_Equity.pdf You will see that not only is NextEra/FL profitting from this scam but they have set up “tax equity” deals with Too-Big-To-Fails, like JP Morgan, Bank of America, Google, etc etc. They’ve found a fabulous way to strip mine our tax code — taking from us at the left pocket using the tax angle and stealing from us at the right pocket by increasing our electricity rates for products that are low value and do not hold up to their claims. It’s a scam.

christensen411,
My apologies for taking so long to respond to your comment. It took a while for the enormity of what you said to sink in.

Other than murdering its own citizens, one of the worse things that governments do is “Corporate Welfare”. It would be wonderful to think that it can’t happen here but Solyndra and thousands of similar scams say otherwise. What you have highlighted makes Solyndra look like pocket change. Will anyone be going to jail for this massive theft of taxpayer dollars? Nobody will even be indicted!

If the “Fat Cats” at FP&L can safely ignore reports in Businessweek and the Washington Times nothing we can say here will make any difference. Next Era Energy will continue to laugh all the way to the bank.

Given my analytical frame of mind here is an attempt to express the effect of this stinking corruption on a FP&L customer like me: